Tradefair Weekly Update / Editor / 11 July 2008 / Leave a comment

Buzzwords of the week
To a beginner one of the lesser known markets out there is the Commodity markets. Here you are allowed to trade things like gold, oil and farming products. The farming products are often referred to as "softs".
At Tradefair Spreads we provide spreads on the commodity markets in addition to stocks indices and currencies.

Commodities on the Tradefair Spreads platform include
energy related commodities: Brent crude oil, US crude, heating oil, natural gas and carbon emission
metals: gold, silver, platinum and copper
"softs": cocoa, corn, oats, coffee, sugar, wheat and soybean (meal and oil)
livestock: hogs, cattle

The rise and rise of oil - so far
The dramatic rise in oil prices over the last year has impacted nearly everyones daily lives, most obviously by the escalating prices at the fuel pumps. This rise has also been hurting the 100's of businesses where fuel is a significant proportion of their cost base. Various studies have suggested that in the past a number of recessions and related stock market declines were directly triggered by increases in the oil price.

Traders who have been long of oil this year have had a field day. The price of Brent crude dropped a little in the first two months of the year, down from just below $100 to the high eighties. However if you had gone long in late February when price hit new highs again you would have made around a 40% profit to date. A key factor in the continuation of this trend was the psychologically importance of $100 level being breached, 4 months later price is now 40% higher, above $140.

Where next?
There are two dramatically different schools of thought on this, and over the next few months we will see these two schools battling it out - some think that the current high levels are driven by speculators, and sooner or later they will get wary of the market and retreat, this will lead to a dramatic fall in price. Others are talking about $200. Whichever way it turns out this will potentially have a significant impact on stock markets. So experienced traders will definitely watching the oil price even if they are not trading it.

Here is a chart of Brent crude over the last few months, extracted from the Tradefair Spreads platform, which shows the dramatic rise in price.

Technical tip 2
Many experienced traders like to follow what is going on in a wide range of markets - what happens in one can influence what happens in another. Oil is a great example - it has been in a powerful up trend which traders have been able to capitalise on. The up trend in oil has had a knock on effect on stocks and indices in related markets.

Useful Links

Tradefair Spreads - financial news - http://www.tradefair.com/dailynews.html
Bloomberg - http://www.bloomberg.com/
CNN - http://money.cnn.com/
BBC Money - http://www.bbc.co.uk/money/
Martin's Money - http://www.moneysavingexpert.com/
Motley Fool - http://www.fool.co.uk/
Shareworld - http://www.shareworld.co.uk/
Sparkdales - http://sparkdales.co.uk/
Naked Trader - http://www.nakedtrader.co.uk/
Financial Times - http://www.ft.com/home/uk
This is Money - http://www.thisismoney.co.uk/